High order book buoys BGR in slump waters

BG Raghupathy, CMD, BGR Energy explains to CNBC-TV18 that a high order book as compared to last year has helped the power company navigate the economic slowdown, reduction in PSU orders thanks to coal-allocation and land acquisition problems, damage caused by Chinese imports and drying up of offers from the private-sector.

Below is an edited transcript of the interview on CNBC-TV18.

Q: Could you explain the details of the order you recently bagged?

A: We bagged the order from Damodar Valley Corporation for part of NTPC's bulk tender of 2x660 MW boilers at Raghunathpur, West Bengal. The value of the order is Rs 1,901 crore and with this our order book on hand is Rs 14,577 crore.

Q: Was the bid very competitive? What kind of margins are you expecting?

A: The competition included L&T and BHEL. The margin is slightly under pressure and this order takes the number of boilers to be delivered to six. When we do collective purchase, we hope to improve the margin to our annual levels of a PAT of 6% and a PBT of 10%.

Q: Can you tell us how the order book is shaping up? Has there been a growth in year-on-year terms?

A: In the last one-and-a-half years, NTPC's tender was the only order which was finalised. And out of a total order for 11 boilers, we bagged orders to make six boilers. In the tender for 800 MW turbine generators, we bagged orders for four boilers. However, the orders are yet to come shortly.

Q: How much has the economic slowdown affected your order book?

A: We have performed better this year with an order book of Rs 8,500 crore compared to an order book of Rs 1,600 crore last year.

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Q: What are the revenue and margins you expect for the current year? 

A: The EBITDA in the last quarter was much higher at 14.42%, though the PAT was slightly less than the normal 6%, at 5.51%. We hope to achieve a similar PAT by the year-end. We also expect to increase the turnover by about 10% over the last year's, and that sets the target at about Rs 3,750 crore.

Q: Do you expect your PAT to be as high as it was in FY12?

A: No. The PAT will slightly be under pressure, but we will be able to maintain the of the previous quarter.

Q: What are your views on the new import duty on power equipment? Do you think it was a little too late? Will it impact the capital goods industry at this point?

A: Yes, this should have been implemented three years ago. The Chinese imports have caused the drying up of order placements.

Q: Do you think the outlook for utilities is bleak over the next two-to-three?

A: There are projects worth around Rs 30,000 crore from the state generation sector and PSUs like NTPC. Most tenders have run into problems of coal allocation and land acquisition which will be overcome in around four months' time. We expect these tenders to be finalised either in the current fiscal or in the next 12 months.

Q: There are rumours that perhaps the promoters are looking to divest their stake of 10-15%? Are you in talks with any potential investors to divest your stake?

A: That is a figment of imagination.

Q: So you are not likely to divest your stake?

A: No, we have no plans at all to sell. We might sell 6% to meet the statutory requirements of 75% holding.

Q: Would that go to a strategic company?

A: That is yet to be decided and we have a year's time to do that

Q: Do you see any change in the order-book scenario from the private sector? Are stranded plants continuing with construction? How would you access the private sector capital goods segment?

A: Yes, we do not expect any new orders from the private sector. Unfortunately, they have not got payments for the power they have supplied already to discoms and a huge amount of has been held up.

Once these amounts are released, they will complete the projects on hand and continuance of payment from discoms will help them think about the new projects.